Answer: $20,000
Explanation:
The reserve requirement is a central bank regulation which sets minimum amount of reserves which must be held by a commercial bank.
When reserve requirement = 20%
= 20/100
= 0.20
Total increase in the checkable deposit will be = $4,000 / 0.20= $20,000
Stone Culture Corporation was organized on January 1, 2017. For its first two years of operations, it reported the following:
Net Income for 2017 $ 54,000
Net Income for 2018 59,000
Dividends for 2017 22,000
Dividends for 2018 34,000
Total assets at the end of 2017 139,000
Total assets at the end of 2018 256,000
On the basis of the data given, prepare a statement of retained earnings for both 2017 (its first year of operations) and 2018.
Answer:
Statement of retained earnings
For the year ended 2017
Retained earnings, January 1, 2017 $0
Add: Net Income $54,000
Less: Dividends $22,000
Retained earnings, December 31, 2017 $32,000
Statement of retained earnings
For the year ended 2018
Retained earnings, January 1, 2018 $0
Add: Net Income $59,000
Less: Dividends $34,000
Retained earnings, December 31, 2018 $25,000
a. Statement of retained earnings for the year ended 2017 is $32,000.
b. Statement of retained earnings for the year ended 2017 is $25,000.
Statement of retained earnings:
Statement of retained earnings for the year ended 2017
Retained earnings, January 1, 2017 $0
Add Net Income $54,000
Less Dividends ($22,000)
Retained earnings, December 31, 2017 $32,000
($54,000-$22,000)
Statement of retained earnings for the year ended 2018
Retained earnings, January 1, 2018 $0
Add Net Income $59,000
Less Dividends $34,000
Retained earnings, December 31, 2018 $25,000
($59,000-$34,000)
Inconclusion the statement of retained earnings for the year ended 2017 is $32,000 and the Statement of retained earnings for the year ended 2017 is $25,000.
Learn more about statement of retained earnings here:https://brainly.com/question/25631040
Statement of Shareholders' Equity You may use the attached spreadsheet to help you complete this activity, but you are not required to do so. You will find the spreadsheet by clicking on the green Excel icon in the upper left hand corner of the activity. On January 1, 2019, Powder Company provided the following shareholders' equity section of its balance sheet: Contributed Capital: Preferred stock, $100 par $ 92,800 Common stock, $5 par 37,400 Additional paid-in capital on preferred stock 21,500 Additional paid-in capital on common stock 58,700 Total contributed capital $210,400 Retained earnings 185,700 Total Shareholders' Equity $396,100 During 2019, the following transactions and events occurred and were properly recorded: Powder issued 1,800 shares of common stock at $13 per share. Powder issued 340 shares of preferred stock at $130 per share. Powder earned net income of $38,950. Powder paid a $7 per share dividend on the preferred stock and a $1 per share dividend on the common stock outstanding at the end of 2019. Required: Prepare Powder's statement of shareholders' equity (include retained earnings) for 2019. POWDER COMPANY Statement of Shareholders' Equity For Year Ended December 31, 2019 Preferred Stock $100 par Common Stock $5 par Additional Paid-in Capital on Preferred Stock Additional Paid-in Capital on Common Stock Retained Earnings Total $ $ $ $ $ $ $ $ $ $ $ $
Answer:
POWDER COMPANY Statement of Shareholders' Equity For Year Ended December 31, 2019:
Preferred Stock $100 par $126,800
Common Stock $5 par $46,400
Additional Paid-in Capital on Preferred Stock $31,700
Additional Paid-in Capital on Common Stock $73,100
Retained Earnings $206,494
Total Shareholders' Equity $484,494
(See calculations below:)
Explanation:
a) Statement of Shareholders' Equity: This is a financial statement under the balance sheet which a company issues to show the changes within the equity section of the balance sheet over a designated period of time.
b) Preferred Stock $100 par $92,800
New Issue, 340 $34,000
Total $126,800
c) Common stock, $5 par = $37,400
New Issue, 1,800 shares = $9,000
Total $46,400
d) Additional paid-in capital on preferred stock 21,500
From new issue of 340 by $30 per share 10,200
Total $31,700
e) Additional paid-in capital on common stock $58,700
From New Issue 1,800 by $8 per share $14,400
Total $73,100
f) Retained earnings = $185,700
Net Income for the year $38,950
Less Dividends: Preferred -$8,876 ($7 x 1,268 shares)
Less Dividends: Common -$9,280 ($1 x 9,280 shares)
Retained Earnings balance $206,494
Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $1,632,000. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product
Answer:
Product L= $34
Product H= $34
Explanation:
Giving the following information:
Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units.
A unit of either product requires 0.4 direct labor-hours.
Estimated overhead= $1,632,000. R
First, we need to calculate the estimated overhead rate:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Estimated manufacturing overhead rate= 1,632,000/(48,000*0.4)
Estimated manufacturing overhead rate= $85 per direct labor hour
Now, we can allocate overhead:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Product L= 85*0.4= $34
Product H= 85*0.4= $34
The annual accounts payable is 4,800; the annual revenue is 75,000, and the gross profit margin is 40%. The payable days estimated from the data above is ______. Review Later 29 46 39
Answer:
Estimated Payable Days = 39
Explanation:
Given:
Annual account Payable = 4,800
Annual revenue = 75,000
Gross profit margin = 40%
Find:
Payable days
Computation:
Annual expense = Annual revenue(1-Gross profit margin)
Annual expense = 75,000(1-0.4)
Annual expense = 45,000
Estimated Payable Days = [4,800 × 365] / 45,000
Estimated Payable Days = 39
You work for an auto parts manufacturer that has traditionally had an immense marketing budget. Company executives, however, recently reallocated some of the company’s marketing funds to production. Consequently, the company needs to cut marketing costs. You decide to pitch an idea to the automobile manufacturer with whom you work most closely—to use cross-promotion to market both companies’ products.
Answer: The parties involved must compromise in order to work well together
Explanation:
Here is the complete question:
You work for an auto parts manufacturer that has traditionally had an immense marketing budget. Company executives, however, recently reallocated some of the company’s marketing funds to production. Consequently, the company needs to cut marketing costs. You decide to pitch an idea to the automobile manufacturer with whom you work most closely—to use cross-promotion to market both companies’ products.
Which of the following is detrimental to using cross-promotion?
a. One or both companies lose customers.
b. One or both companies lose competitive edge.
c. One company garners all the attention and support.
d. The parties involved must compromise in order to work well together.
e. One of the companies absorbs most of the costs associated with marketing.
Solution:
Cross-promotion is a form of marketing promotion that involves targeting of the customers of one product or service awith promotion of a related product. A common example is the cross-media marketing of a brand e.g Oprah Winfrey's promotion on her shows on television of her magazines, books, and website.
The main aim of cross promotion is the expansion of the marketing reach of a product. Since the company executives, want to reallocate some of the company’s marketing funds to the production department, it will be harmful in a case whereby the parties that are involved compromise in order to work well together.
Describe at least three exchange rate factors that are likely to attract foreign investors to a country's currency. Explain why these factors are attractive to foreign investors.
Answer: 1. High Interest
2. Low Government Debt
3. Political Stability
Explanation:
Foreign Investors are Investors and investors always like to invest where there are prospects of growth and profit.
High Interest Rates give them the opportunity to invest their money in a currency that will give them a great return because a country where there are high interest rates imparts this on its currency which causes it to rise in value thereby giving currency holders a capital gain.
Another factor is Government Debt. A country with high Government debt will typically be unable to raise funds through the bond market easily. This shortage of funds can lead to inflation which devalues currency causing foreign currency investors to flee.
Finally there is the Political Factor (other factors exist). A stable country politically stands a better chance of maintaining a higher value currency that one with lower political stability. This is because political Stability attracts investors and as more investments come into a country, this reflects in its currency by making it stronger which will attract foreign currency investors.
The River Falls Company has two divisions. The Cutting Division prepares timber at its sawmills. The Coating Division prepares the cut lumber into finished wood for the furniture industry. No inventories exist in either division at the beginning of 20X5. During the year, the Cutting Division prepared 60,000 cords of wood at a cost of $720,000. All the lumber was transferred to the Coating Division, where additional operating costs of $5 per cord were incurred. The 600,000 boardfeet of finished wood were sold for $2,500,000.
Required:
a. Determine the operating income for each division if the transfer price from Cutting to Assembly is at cost - $11 a cord.
b. Determine the operating income for each division if the transfer price is $9 per cord.
c. Since the Cutting Division sells all of its wood internally to the Assembly Division, does the manager care what price is selected? Why? Should the Cutting Division be a cost center or a profit center under the circumstances?
Answer:
a) Operating income at the cost of $11 is $660,000
b) Operating income at the cost of $9 is $540,000
c) Yes, the manager care what price is selected. The Cutting Division be a cost center.
Explanation:
a) Cutting Assembly
Revenue $660,000 $2,500,000
Cost of services
Incurred $660,000 $360,000
Transferred-in $0 $660,000
Total $660,000 $1,020,000
Operating income $0 $1,480,000
Operating income at the cost of $11 = 60,000 cords × $11 = $660,000
b) Cutting Assembly
Revenue $540,000 $2,500,000
Cost of services
Incurred $660000 $360,000
Transferred-in $0 $540,000
Total $660000 $900,000
Operating income ($120,000) $1,600,000
Operating income at the cost of $9 = 60,000 cords × $9 = $540,000
Using a LIFO perpetual cost flow, calculate the value of the ending inventory and the cost of goods sold for the month of November of Beamer Company using the data below.
Nov 1 Purchased 600 units $80 each
Nov 4 Sold 200 units
Nov 11 Purchased 350 units $82 each
Nov 12 Sold 275 units
Nov 22 Purchased 175 units $84 each
Nov 23 Sold 155 units
Calculate the following:
Inventory valuation at the end of November
Answer:
Ending inventory= $39,830
Explanation:
Giving the following information:
Company using the data below.
Nov 1 Purchased 600 units $80 each
Nov 4 Sold 200 units
Nov 11 Purchased 350 units $82 each
Nov 12 Sold 275 units
Nov 22 Purchased 175 units $84 each
Nov 23 Sold 155 units
Under the LIFO (last-in, first-out) method, the ending inventory cost is calculated using the cost of the firsts units incorporated. Using the perpetual method, the company identifies the cost with each specific unit.
Ending inventory in units= total units - units sold= 495 units
COGS:
Nov 4= 200*80= 16,000
Nov 12= 275*82= 22,550
Nov 23= 155*84= 13,020
Ending inventory= 400*80 + 75*82 + 20*84= $39,830
Explain whether the Statement of Cash Flows is able to illustrate the ‘liquidity’ of an entity to its users and provide ONE recommendation how companies can maintain liquidity during this pandemic.
Answer:
A cash flow is an important part of an organisation. it helps in understanding the cash flows from investing, operating and financial activities.
A cash flow statement helps in evaluating the liquidity of a company.
During the current Pandemic, maintaining liquidity is very important.
some business functions freezes. such firm will experience cash operating cots. the firm should have enough cash to maintain the business in moving forward.
Explanation:
Solution
A cash flow statement is a vital parts or components provided by an organisation.i t helps in interpreting the cash flows from investing, operating and financial activities or functions.
An organisation income statement is made ready based on the accrual basis and so it does help or aid in the understanding the movement of cash during.
A cash flow statement helps in evaluating the liquidity of a company.
Operating activities of cash flows is computed or estimated by putting Non cash expense to net income and then deducting current liabilities and assets.
Cash flow from operating activities are necessary to the firm because it helps in providing cash to invest assets and payback of debt.
Maintaining liquidity during the present pandemic has become very necessary.
Since business functions freezes, the firm will experience cash operating cots. hence the firm should have sufficient cash to maintain the business running.
The firm can also take a loo at their current assets to see if it can be converted to cash on quickly basis.
Selected financial information for Thornton Company for 2019 follows: Sales $ 2,000,000 Cost of goods sold 1,400,000 Merchandise inventory Beginning of year 159,000 End of year 200,000 Required Assuming that the merchandise inventory buildup was relatively constant, how many times did the merchandise inventory turn over during 2019? (Round your answer to 2 decimal places.)
Answer:
7.80 times
Explanation:
First of all we have to calculate the average inventory
Opening inventory= 159,000
Closing inventory= 200,000
Average inventory= (opening inventory+closing inventory)/2
= ( 159,000+200,000)/2
= 359,000/2
= 179,500
The next step is to find the merchandise inventory turnover which is calculated as
= Cost of goods/ Average inventory
Cost of goods= $1,400,000
Average inventory= 179,500
= 1,400,000/179,500
= 7.799 times
= 7.80 times (to 2 decimal places)
Hence the merchandise inventory was turned over 7.80 times in 2019
Answer: 7.80 times
Explanation:
The Merchandise Inventory Formula can be calculated with the Inventory Turnover Ratio which aims to measure how often a company is able to change inventory over a period. The purpose being to see if the company in question is carrying enough Inventory per period.
The formula for this is,
= Cost of Goods sold / Average Inventory
Average Inventory = (Beginning Inventory + Ending Inventory ) / 2
= (159,000 + 200,000) / 2
= 359,000/2
= $170,500
Therefore,
Inventory Turnover Ratio = 1,400,000/170,500
= 7.7994
= 7.80
The Merchandise was turned over 7.80 times in 2019.
Nieto Company’s budgeted sales and direct materials purchases are as follows. Budgeted Sales Budgeted D.M. Purchases January $261,000 $39,300 February 250,800 43,300 March 344,000 44,000 Nieto’s sales are 30% cash and 70% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Nieto’s purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.(a) Prepare a schedule of expected collections from customers for March. (Round answers to 0 decimal places, e.g. 2,500.)NIETO COMPANYExpected Collections from Customers MarchMarch cash salesCollection of March credit salesCollection of February credit salesCollection of January credit salesJanuary cash salesPayment of February credit purchasesFebruary cash salesMarch cash purchasesPayment of March credit purchases $Collection of January credit salesJanuary cash salesCollection of March credit salesCollection of February credit salesMarch cash purchasesPayment of March credit purchasesFebruary cash salesMarch cash salesPayment of February credit purchasesPayment of March credit purchasesCollection of February credit salesCollection of January credit salesFebruary cash salesJanuary cash salesMarch cash purchasesMarch cash salesPayment of February credit purchasesCollection of March credit salesMarch cash purchasesMarch cash salesPayment of February credit purchasesCollection of March credit salesCollection of February credit salesCollection of January credit salesPayment of March credit purchasesFebruary cash salesJanuary cash salesTotal collections $(b) Prepare a schedule of expected payments for direct materials for March. (Round answers to 0 decimal places, e.g. 2,500.)NIETO COMPANYExpected Payments for Direct MaterialsMarchCollection of January credit salesFebruary cash salesMarch cash purchasesPayment of March credit purchasesPayment of February credit purchasesJanuary cash salesMarch cash salesCollection of March credit salesCollection of February credit sales $Collection of January credit salesMarch cash salesFebruary cash salesCollection of March credit salesCollection of February credit salesMarch cash purchasesJanuary cash salesPayment of February credit purchasesPayment of March credit purchasesCollection of February credit salesPayment of March credit purchasesCollection of January credit salesMarch cash salesPayment of February credit purchasesMarch cash purchasesCollection of March credit salesFebruary cash salesJanuary cash salesTotal payments $
Answer:
a is correct
Explanation:
Jordan has inherited some money and he wants to put it into an account
that would be very safe. He's worried about having to pay taxes on the
interest as well. What is the best option for savings? *
O
Treasury Bill or Note
O
Corporate Bond
High Yield Savings Account
O
Certificate of Deposit
Answer:
The correct answer is the third option: High Yield Savings Account.
Explanation:
To begin with, the name of "High Yield Savings Account" refers to a financial tool whose purpose is to act as a deposit account in order to save money with the plus of getting a higher interest rate than in other traditional saving accounts and also offers better returns than traditional checking accounts. Moreover, this typo of account does also tends to come with no monthly fees and low fees for certain situations like having non-sufficient funds. That is why this is best option for Jordan in order to save the money that he inherited.
Cobe Company has already manufactured 23,000 units of Product A at a cost of $30 per unit. The 23,000 units can be sold at this stage for $450,000. Alternatively, the units can be further processed at a $250,000 total additional cost and be converted into 5,900 units of Product B and 11,400 units of Product C. Per unit selling price for Product B is $109 and for Product C is $54. 1. Prepare an analysis that shows whether the 23,000 units of Product A should be processed further or not.
Answer:
Net advantage from further processing $558,700
Explanation:
A company should process further a product if the additional revenue from the split-off point is greater than than the further processing cost.
Also note that all cost incurred up to the split-off point are irrelevant to the decision to process further .
$
Sales revenue after the split-off point
Product B ( 5,900 ×109) 643,100
Product C (11,400× $54) 615,600
Sales revenue at the split-off point 450,000
Additional sales revenue 808,700
Further processing cost (250,000)
Net advantage from further processing 558,700
Note that all costs incurred up to the split-off points are irrelevant i.e $30 per unit to produce product A. Whether or not the products are processed further they would be incurred. As such, they would not be considered in the analysis.
Match the following statements to the appropriate terms. Segregation of duties. select the appropriate term Cash that is not available for general use, but instead is limited to a particular purpose. select the appropriate term Two or more employees circumventing prescribed procedures. select the appropriate term Prevent a transaction from being recorded more than once. select the appropriate term Checks which have been returned by the maker's bank for lack of funds. select the appropriate term Checks which have been paid by the depositor's bank. select the appropriate term A projection of anticipated cash flows. select the appropriate term Anything that a bank will accept for deposit. select the appropriate term Physical control devices. select the appropriate term A basic principle of cash management. select the appropriate term Insurance protection against misappropriation of assets. select the appropriate term Document indicating the purpose of a petty cash expenditure. select the appropriate term Issued checks that have not been paid by the bank. select the appropriate term Highly liquid investments.
Answer and Explanation:
The matching of the following statements to the appropriate terms :
1. Segregagtion of duties = Property custody should be kept away from keeping records of such assets
2. Cash that is not available for general use, but instead is limited to a particular purpose = Restricted cash as it is used for specific purpose not for the general purpose
3. Two or more employees circumventing prescribed procedures = Collusion. It means there is a secret agreement in view to deceived others or mislead others
4. Prevent a transaction from being recorded more than once = Prenumbered documents. It means the documents like recepits, checks, invoices that are to be accounted which reduced the unauthorized transactions
5. Checks which have been returned by the maker's bank for lack of funds. = NSF checks. It is a non sufficent fund which represents that the account have does not contain sufficent funds
6. Checks which have been paid by the depositor's bank = Cancelled checks. The checks which are cancelled due to insufficent balance or any other reason
7. A projection of anticipated cash flows.= Cash budget. It records all cash receipts and all cash payments related to the business transactions
8. Anything that a bank will accept for deposit = Cash. Cash is a more liquid assets that is shown in the current assets side of the balance sheet
9. Physical control device = Televison monitors, sensors, etc. These are the devices which are physically controlled
10. A basic principle of cash management = Invest idle cash. It refers to the cash which is not earned any value or neither it increased the value
11. Insurance protection against misappropriation of assets = Bonding employees. This refers to protect employees against any losses, theft, etc
12. Document indicating the purpose of a petty cash expenditure = Petty cash recipts. It refers how much cash is used till date, etc
13. Issued checks that have not been paid by the bank = Outstanding checks. For this the treatment is that we have to show this in a negative sign while computing the adjsuted balance of bank balance
14. Highly liquid investments = Cash equiivalent. This include cash in hand, cash at bank, marketable securities which shows the highly liquid investment and the same is shown in the current asset side of the balance sheet
On June 3, Marigold Company sold to Chester Company merchandise having a sale price of $2,200 with terms of 4/10, n/60, f.o.b. shipping point. An invoice totaling $97, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company.
Prepare journal entries on the Sage Company books to record all the events noted above under each of the following bases.
a. Sales and receivables are entered at gross selling price.
b. Sales and receivables are entered at net of cash discounts.
Answer:
A.
Jun 3
Dr Account receivable 2,200
Cr Sales 2,200
Jun 12
Dr Cash 2,112
Dr Sales discount 88
Cr Account receivable 2,200
B.
Jun 3
Dr Account receivable 2,112
Cr Sales discount 2,112
Jun 12
Dr Cash 2,112
Cr Account receivable 2,112
Explanation:
Marigold Company Journal entries
A.
Jun 3
Dr Account receivable 2,200
Cr Sales 2,200
Jun 12
Dr Cash 2,112
(2,200-88)
Dr Sales discount 88
(2,200*4%)
Cr Account receivable 2,200
B.
Jun 3
Dr Account receivable 2,112
Cr Sales discount 2,112
(2,200*96%)
Jun 12
Dr Cash 2,112
Cr Account receivable 2,112
100%-4%=96%
QS 11-6 Recording employer payroll taxes LO P3 Merger Co. has 10 employees, each of whom earns $1,550 per month and has been employed since January 1. FICA Social Security taxes are 6.2% of the first $128,400 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee. Prepare the March 31 journal entry to record the March payroll taxes expenses. (Round your answers to 2 decimal places.)
Answer:
March 31, 202x, payroll tax expenses
Dr FICA tax (OASDI) expense 961
Dr FICA tax (Medicare) expense 224.75
Dr FUTA tax expense 93
Dr SUTA tax expense 837
Cr FICA tax (OASDI) payable 961
Cr FICA tax (Medicare) payable 224.75
Cr FUTA tax payable 93
Cr SUTA tax payable 837
Explanation:
Since we are calculating only payroll taxes, the wages expense is not included in this journal entry.
total payroll for the 10 employees = 10 x $1,550 = $15,500
each employee has accumulated earnings of $1,550 x 3 = $4,650
Rodgers Company gathered the following reconciling information in preparing its May bank reconciliation. Calculate the adjusted cash balance per books on May 31. Cash balance per books, 5/31 $3,398 Deposits in transit 202 Notes receivable and interest collected by bank 983 Bank charge for check printing 26 Outstanding checks 1,694 NSF check 175
Answer:
$4,180
Explanation:
Cash balance per books (May 31) $3,398
Notes receivable and interest collected by bank $983
Bank fees ($26)
NSF check ($175)
total reconciled cash balance per books = $4,180
Outstanding checks and deposits in transit are used to reconcile bank accounts, not the firm's cash account.
Assume that you have the following decision-making options: (1) make the decision on your own with available information, (2) consult others before making a decision, and (3) call a meeting and reach a consensus, seeking to arrive at a final decision everyone can agree on. Which approach would you use to make each of the following decisions and why?
You are the leader of a new product development project. Your team has worked hard on developing a third-generation product that incorporates new technology and meets customer demands. The project is roughly 50 per- cent complete. You have just received a report from the marketing depart- ment detailing a similar product that is about to be released by a competitor. The product appears to utilize radical new design principles that expand the functionality of the product. This poses a serious threat to the success of your project. Top management is considering canceling your project and starting over again. They want you to make a recommendation.
Answer:
(2) consult others before making a decision.
Before I make a recommendation, I will consult my team members. Individually, some may have new ideas and modifications which we can incorporate into the project to even beat the competition and cause management to continue supporting the project.
Explanation:
Even though our competitor's "product appears to utilize radical new design principles that expand the functionality of the product," we can still modify our product. This will not only incorporate the features of our competitor's product, but also further introduce new features that will emanate from the challenge from competition.
This is where the SCRUM framework becomes important. This framework for project management emphasizes teamwork, accountability, and iterative progress toward a well-defined goal, while allowing for tweaks.
Developing this project based on this framework must have made it possible for us to receive the report from the marketing department in the first place. The principles of Scrum are Openness, Respect, Courage, Commitment, and Focus. So, the best we can do will be to prioritize, come up with new improvement ideas, and convince top management not to cancel the project.
You are evaluating two different silicon wafer milling machines. The Techron I costs $285,000, has a three-year life, and has pretax operating costs of $78,000 per year. The Techron II costs $495,000, has a five-year life, and has pretax operating costs of $45,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $55,000. If your tax rate is 24 percent and your discount rate is 11 percent, compute the EAC for both machines.
Answer:
EAC Techron I = -$141,050
EAC Techron II = -$138,181
Explanation:
Techron I costs $285,000, has a three-year life, and has pretax operating costs of $78,000 per year. Salvage value $55,000, use straight line depreciation.
annuity factor = [1 - 1/(1 + r)ⁿ] / r = [1 - 1/(1 + 0.11)³] / 0.11 = 2.4437
depreciation expense per year = ($285,000 - $55,000) / 3 = $76,667
cash outflow years 1 and 2 = [($78,000 + $76,667) x (1 - 24%)] - $76,667 = ($154,667 x 0.76) - $76,667 = $40,880
cash outflow year 3 = [($78,000 + $76,667) x (1 - 24%)] - $76,667 - $55,000 = ($154,667 x 0.76) - $76,667 - $55,000 = -$14,120
NPV = -285,000 - 40,880/1.11 - 40,880/1.11² + 14,120/1.11³ = -285,000 - 36,829 - 33,179 + 10,324 = -344,684
EAC = NPV / annuity factor = -344,684 / 2.4437 = -$141,050
Techron II costs $495,000, has a five-year life, and has pretax operating costs of $45,000 per year. Salvage value $55,000, use straight line depreciation.
annuity factor = [1 - 1/(1 + r)ⁿ] / r = [1 - 1/(1 + 0.11)⁵] / 0.11 = 3.6959
depreciation expense per year = ($495,000 - $55,000) / 5 = $88,000
cash outflow years 1 through 4 = [($45,000 + $88,000) x (1 - 24%)] - $88,000 = ($133,000 x 0.76) - $88,000 = $13,080
cash outflow year 5 = [($45,000 + $88,000) x (1 - 24%)] - $88,000 - $55,000 = ($133,000 x 0.76) - $88,000 - $55,000 = -$41,920
NPV = -495,000 - 13,080/1.11 - 13,080/1.11² - 13,080/1.11³ - 13,080/1.11⁴ + 41,920/1.11⁵ = -495,000 - 11,784 - 10,616 - 9,564 - 8,616 + 24,877 = -510,703
EAC = NPV / annuity factor = -510,703 / 3.6959 = -$138,181
Two design alternatives A and B have the following cash flows. Each alternative has 30-year life at a 5% interest rate. Alternative A Alternative B Initial Cost $700,000 $950,000 Annual Benefits $80,000 $120,000 Annual Operating Cost $20,000 $30,000 Using incremental B/C ratio to select the best alternative. Which of the following statements is TRUE?
A. Incremental B/C ratio is 1.52 and Alternative A should be selected.
B. Incremental B/C ratio is 1.52 and Alternative B should be selected.
C. Incremental B/C ratio is 0.66 and Alternative B should be selected.
D. Incremental B/C ratio is 0.66 and Alternative A should be selected.
Answer:
Incremental B/C ratio is 1.46 and Alternative B should be selected.
Explanation:
Alternative A
Annual net benefit = Annual Benefit - Annual Operating Cost
=80,000 - 20,000
=$60,000
Present Value of all future cash flow = Annual net benefit * PV factor {PVIFA = (1 - (1 + r)^-n) / r}
=60,000 * PVIFA (5%, 30years)
=60,000 * 15.372
=$922,320
Incremental B/C= Present Value of all future cash flow / Initial Cost / Initial Cost
=922,320 / 700,000
=1.3176
Alternative B
Annual net benefit = Annual Benefit - Annual Operating Cost
=120,000 - 30,000
=$90,000
Present Value of all future cash flow = Annual net benefit * PV factor {PVIFA = (1 - (1 + r)^-n) / r}
=90,000 * PVIFA (5%, 30years)
=90,000 * 15.372
=$1,383,480
Incremental B/C= Present Value of all future cash flow / Initial Cost / Initial Cost
=1,383,480 / 950,000
=1.4562
Conclusion: Because Alternative B has higher ratio than the Alternative A, it should be chosen.
The owner of Miller Restaurant is disappointed because the restaurant has been averaging 7,500 pizza sales per month but the restaurant and wait staff can make and serve 10,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.55. Monthly fixed costs (for example, depreciation, property taxes, business license, manager's salary) are $12,000 per month. The owner wants cost information about different volumes so that some operating decisions can be made.REQUIREMENTS:1) Fill in the following chart to provide the owner with the cost information. Then use the completed chart to help you answer the remaining questions:Monthly pizza volume 6,000 7,500 10,000 Total fixed costs Total variable costs Total costs Fixed cost per pizza Variable cost per pizza Average cost per pizza Selling price per pizza S 6.25 S 6.25 S 6.25 Average profit per pizza2) From a cost standpoint, why do companies such as Miller Restaurant want to operate near or at full capacity?3) The owner has been considering ways to increase the sales volume. The owner thinks that 10,000 could be sold per month by cutting the selling price per pizza from $6.25 to $5.75. How much extra profit (above the current level) would be generated if the selling price were to be decreased? (HINT: Find the restaurant's current monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.)
Answer: The answer is provided and attached below.
Explanation:
The explanation for number 1 and 3 has been attached.
2. The break even point is level of production whereby a company makes no profit or loss. When a company operates below the break even point, the company makes a loss and when a company operates above this level, the company make a profit. The higher the level, the higher the profit.
Therefore, from a cost point of view, Miller restaurant and every other company wants to operate at the full or near full capacity in order to earn higher level of profit. At this point, the fixed costs have been recovered, and every additional unit makes up the profit of the company.
William has an A.A. in general studies, but he does not know what career he wants to pursue. He decides to get a job for a year before going back to school. He wants a job near home in an office. He enjoys collaborating with other employees. William places a lot of value on freedom of thought and action at work. He needs about $50,000 per year.
William interviews at a company as an entry level sales person. He learns that it takes about 15 minutes to drive to the office. His job would be to work in a cubicle on a phone talking to potential clients from a script. The job pays about $50,000 per year with the possibility for performance-based bonuses. Which factor makes this job a poor fit for William?A. The company is in a bad location.B. He wants more freedom in how he makes sales.C. He is opposed to sales work.D. The job does not pay enough money.
Answer:
He wants more freedom in how he makes sales
Explanation:
William places a lot of value on freedom of thought and action at work but the job entails him speaking from a script. This hinders freedom in how he makes sales.
I hope my answer helps you
In the Stackelberg model, the leader has a firstminusmover advantage because it A. has lower costs than the follower. B. reacts to the follower's decision. C. differentiates its output. D. chooses its output to manipulate the follower to produce the output that most benefits the leader.
Answer:
D. chooses its output to manipulate the follower to produce the output that most benefits the leader.
Explanation:
Strackelberg model is one where a market leader makes the first move and then the other followers firms follow sequentially.
For this model to be successful, the followers need to observe the leader and follow their lead in a production process or venture.
The market leader usually has an advantage that enables it make the first move.
For example a firm that has a monopoly in a market leads while new entrants follow.
In this model the market leader chooses an output and manipulates the followers to produce the same output, and this benefits the leader
Quantas Industries sold $300,000 of consumer electronics during January under a one-year warranty. The cost to repair defects under the warranty is estimated at 6% of the sales price. On June 20, a customer was given $183 cash under terms of the warranty. Journalize the entry to record (a) the estimated warranty expense on January 31 for January sales on page 10 of the journal and (b) the June 20 warranty work on page 14 of the journal. Refer to the Chart of Accounts for exact wording of account titles.
Answer:
January 31.
Warranty Expense $18,000 (debit)
Warranty Provision $18,000 (credit)
June 20.
Warranty Provision $183 (debit)
Cash $183 (credit)
Explanation:
There is no option on the customer to take the warranty or not. There this type of Warranty is known as an Assurance Type Warranty.
Assurance type warranties are accounted in terms of the Provision Standards as follows ;
Entry when the warranty is granted
Warranty Expense $18,000 (debit)
Warranty Provision $18,000 (credit)
Being recognition of warranty cost and provision.
Warranty Expense $300,000 × 6% = $18,000
When the Warranty Claim is subsequently received.
Warranty Provision $183 (debit)
Cash $183 (credit)
Being utilization of Provision when the warranty claim is received.
Juhasz Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or Rate Direct labor 0.40hours$29.00per hour Variable overhead 0.40hours$4.90per hour In August the company produced 8,800 units using 3,700 direct labor-hours. The actual variable overhead cost was $17,020. The company applies variable overhead on the basis of direct labor-hours. The variable overhead efficiency variance for August is:
Answer: -882
Explanation:
A variable overhead efficiency variance is simply defined as the actual labor hours less the budgeted labor hours which is then multiplied by the hourly rate for the standard variable overhead. It should be note that the standard variable overhead consist of the indirect labor costs like the security and the shop foreman.
Bases on the explanation above, the variable overhead efficiency will be:
= [(8800 × 0.40) - 3700] × 4.90
= -882
This is an unfavorable variance which means that the number of actual hours worked is more than the budgeted hours.
Crane Company purchased equipment on January 1 at a list price of $120000, with credit terms 4/10, n/30. Payment was made within the discount period. Crane paid $4750 sales tax on the equipment and paid installation charges of $2100. Prior to installation, Crane paid $5600 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment
Answer:
The cost of equipment = $127,650
Explanation:
According to International Accounting Standards (IAS) 16, property plants and equipment, the cost of land includes all of the cost necessary to bring and make it ready for the intended use.
These costs include purchase cost, fees and commission associated with the purchase transaction.
Here in this question the installation charges, sales taxes and the cost of concrete slab all fall within the definition of IAS 16
The quotation 4/10, n/30 implies that if payment is made within =10 days, Crane would get 4% off the initial purchase price.
Since the payment was made within the discounted period, the net purchase price would be
Purchase price = 120,000 - (4%× 120,000)= 115,200
The cost of equipment = 115,200 +4,750 + 2,100 + 5600= 127650
The cost of equipment = $127,650
A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.
Required A Required B
Cash Flow Select Chart Amount * PV Factor = Present Value
Annual Cash Flow Present Value of an Annuity of 1
Residual value Present Value of 1
Present value of cash inflows
Immediate Cash Flow
Net Present Value
A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation.
Required A Required BCash Flow Select Chart Amount * PV Factor = Present Value Annual Cash Flow Present Value of an Annuity of 1Residual value Present Value of 1 Present value of cash inflows Immediate Cash Flow Net Present Value
Assume the company requires a 10% rateo return on its vestments. Compute the net present value of each potential investment.
Answer:
a. $509,141
b. $189,495
Explanation:
The computation of the net present value for each case is shown below:
a.
Net present value = Present value after considering the discount rate and salvage value - initial investment
where,
Present value is
= Incremental after tax income + depreciation expense
= $150,000 + ($520,000 - $10,000) ÷ 6 years
= $150,000 + $85,000
= $235,000
Now PVIFA factor at 6 years for 10% is 4.3553
So, present value is
= $235,000 × 4.3553
= $1,023,496
For salvage value, the present value is
= $10,000 × 0.5645 (Discounting factor)
= $5,645
So, total present values is
= $1,023,496 + $5,645
= $1,029,141
And, the initial investment is $520,000
So, the net present value is
= $1,029,141 - $520,000
= $509,141
b.
Net present value = Present value after considering the discount rate and salvage value - initial investment
where,
Present value is
= Incremental after tax income + depreciation expense
= $60,000 + ($380,000 - $20,000) ÷ 8 years
= $60,000 + $45,000
= $105,000
Now PVIFA factor at 6 years for 10% is 5.3349
So, present value is
= $105,000 × 5.3349
= $560,164.50
For salvage value, the present value is
= $20,000 × 0.4665 (Discounting factor)
= $9,330
So, total present values is
= $560,164.50 + $9,330
= $569,494.50
And, the initial investment is $380,000
So, the net present value is
= $564,494.50 - $380,000
= $189,495
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results:
Sales (30,000 balls) $750,000
Variable expenses 450,000
Contribution margin 300,000
Fixed expenses 210,000
Net operating income 90,000
Required:
1A. Compute the CM ratio and the break-even point in balls.
1B. Compute the the degree of operating leverage at last year.
2. Due to an increase in labor rates, the company estimates that variable expenses will increase by $3 per ball next year. If this change takes place and the selling price per ball remains con- stant at $25, what will be the new CM ratio and break-even point in balls?
3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as 5. last year? The president feels that the company must raise the sell- ing price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?
4. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls?
Refer to the data in (5) above.
A. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?
B. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.
C. If you were a member of top management, would you have been in favor of constructing the new plant? Explain.
Answer:
1A. Compute the CM ratio and the break-even point in balls.
CM ratio = 2.5break even point = 21,000 balls1B. Compute the degree of operating leverage at last year.
31.82%2. Due to an increase in labor rates, the company estimates that variable expenses will increase by $3 per ball next year. If this change takes place and the selling price per ball remains constant at $25, what will be the new CM ratio and break-even point in balls?
CM ratio = 3.57break even point = 30,000 balls3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as 5. last year? The president feels that the company must raise the sell- ing price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?
42,858 ballsnew price of $28 per ball4. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls?
CM = 1.3226,250 ballsA. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?
31,875 balls
B. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.
Income Statement
Total revenue $750,000
Variable expenses $270,000
Contribution margin $480,000
Fixed expenses $420,000
Net operating income $60,000
Degree of operating leverage = 60.87%
C. If you were a member of top management, would you have been in favor of constructing the new plant?
If you cannot avoid paying the salary raise, then the company needs to carry on the new plant project.
Explanation:
sales price per ball = $25
variable expenses: $15 per unit
direct labor $9other variable costs $6CM ratio = net sales / CM = $750,000 / $300,000 = 2.5
break even point = total fixed costs / CM per unit = $210,000 / $10 = 21,000 balls
degree of operating leverage = fixed costs / total costs = $210,000 / $660,000 = 31.82%
new CM ratio = net sales / CM = $750,000 / $210,000 = 3.57
break even point = total fixed costs / CM per unit = $210,000 / $7 = 30,000 balls
sales level for $90,000 profit = ($210,000 + $90,000) / $7 = 42,857.14 ≈ 42,858 balls
CM ratio (new plant) = net sales / CM = $750,000 / $570,000 = 1.32
break even point = total fixed costs / CM per unit = $420,000 / $16 = 26,250 balls
sales level for $90,000 profit = ($420,000 + $90,000) / $16 = 31,875 balls
OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $5.0 million. Interest is payable at maturity. Required:Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions: (Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).)Find the interest expense:interest rate fiscal year-end interest expense12% december 31 =10% September 30 =9% october 31 =6% january 31 =
Answer: The answers are given below
Explanation:
December 31 has interest rate = 12 % Interest expense will be:
= 5 000 000 × (12/100) × (6 /12)
= 5 000 000 × 0.12 × 0.5
= $ 300,000
September 30 has interest rate = 10 % Interest expense will be:
= 5 000 000 × (10/100) × (3/12)
= 5 000 000 × 0.10 × 0.25
= $ 125,000
October 30 has interest rate = 9% Interest expense will be:
= 5 000 000 × (9/100) × (4/12)
= 5 000 000 × 0.09 × 0.33
= $ 150,000
January 31 has interest rate = 6% Interest expense will be:
= 5 000 000 × (6/100) × (7/12)
= 5 000 000 × 0.06 × 0.583
= $ 175,000
At the end of April, Cavy Company had completed Job 766 and 765. According to the individual job cost sheets the information is as follows:
Job
Direct Materials
Direct Labor
Machine Hours
Job 765
$5,670
$3,500
27
Job 766
$8,900
$4,775
44
Job 765 produced 152 units, and Job 766 consisted of 250 units.
Assuming that the predetermined overhead rate is applied by using machine hours at a rate of $200 per hour, determine the (a) balance on the job cost sheets for each job, and (b) the cost per unit at the end of April.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Job 765:
Direct material= $5,670
Direct labor= $3,500
Machine Hours= 27
Job 766:
Direct material= $8,900
Direct labor= $4,775
Machine Hours= 44
Job 765 produced 152 units, and Job 766 consisted of 250 units.
Assuming that the predetermined overhead rate is applied by using machine hours at a rate of $200 per hour.
Costs sheet:
Job 765:
Direct material= 5,670
Direct labor= 3,500
Allocated overhead= 200*27= 5,400
Total cost= 14,570
Unitary cost= 14,570/152= $95.85
Job 766:
Direct material= 8,900
Direct labor= 4,775
Allocated overhead= 200*44= 8,800
Total cost= 22,475
Unitary cost= 22,475/250= $89.9